BOP swings to deficit of $813M in January

The Philippines started the year with more money leaving the country, posting a balance-of-payments (BOP) deficit of $813 million in January mainly as the government settled maturing foreign exchange obligations that month.

Bangko Sentral ng Pilipinas (BSP) data released Friday showed that the deficit recorded last month was the widest since January 2014’s $4.48 billion. It was also a reversal of the surpluses of $481 million last December and $136 million a year ago.

The BOP is a summary of all the businesses the country does with the rest of the world.

“The $813-million BOP deficit in January was largely due to payments by the national government for its maturing foreign exchange obligations and results of the foreign exchange operations of the BSP,” Deputy Governor Diwa C. Guinigundo explained.

“Based on the latest available data, the $130-million net outflow recorded in BSP-registered foreign portfolio investments partly contributed to the deficit,” Guinigundo added.

The BSP last Thursday attributed the net outflow of so-called “hot money” last January to “lingering concerns on China’s economic slowdown and plunging global oil prices.”

The net outflows recorded last month meant more foreign-led investments in bonds, deposits and stocks left than entered domestic markets. Portfolio investments are considered short-term bets—hence the nickname “hot money”—because these placements may be pulled out quickly.

Separately, BSP Governor Amando M. Tetangco Jr. noted that the BOP deficit in January was “partly offset by foreign exchange inflows from foreign exchange deposits by the national government and income from the BSP’s investments abroad.”

“We see this [deficit] as temporary and expect to see a turnaround later this year, given steady remittances and receipts from the business process outsourcing (BPO) sector,” Tetangco said.

Last year, the BOP swung to a surplus of $2.6 billion, a turnaround from the $2.9-billion deficit in 2014—the first annual deficit in a decade as well as the biggest on record, largely attributed to the normalization of monetary policy in the US during that time.

The end-2015 surplus meant that the amount of dollars that entered the economy that year was more than the money that left the country.

The BSP had projected the BOP surplus to reach $2.2 billion this year and result to an increase in the gross international reserves (GIR) to $82.7 billion, equivalent to nine months of import cover.

Preliminary BSP data showed that the GIR as of end-January went down to $80.2 billion from the $80.7 billion in end-December as well as the same month last year.

The BSP had said that the end-January GIR level “remains ample” as it could cover 10.2 months’ worth of imports of goods and payments of income and services.

Sources of income for the country include remittances from Filipinos overseas, sales from exports of goods and services as well as foreign investments and revenues from industries such as BPO and tourism.